Measures needed to promote purchasing power, Rabobank says

Submitted by Janene Pieters on August 27, 2018 - 10:00

July 1 is the day that many things will change in the Netherlands which will affect the wallet of many citizens..

The Rutte III government needs to take measures to encourage purchasing power development, because employees otherwise benefit from economic growth only to a limited extent, Rabobank concluded in a study into wage developments. "While the Dutch economy grew by 2.9 percent last year, the collective bargaining wages only climbed 1.4 percent - only barely enough to rise above the 1.3 percent inflation", the bank said, NU.nl reports.

The government should reduce the difference between gross salary costs and net pay in order to stimulate purchasing power, Rabobank economists Barbara Baarsma and Nic Vrieselaar said. According to Baarsma, there are two options. Either the gross salary costs for the employer could be reduced, or the marginal tax burden for employees could be lowered. Encouraging permanent contracts can also increase the purchasing power for employees.

The disappointing purchasing power developments can be attributed to atomization and digitization, which result in production and administrative work paying less, the economists said, according to the newspaper. Competition with the foreign working population can also play a role. Companies outsource work to low-wage countries, and residents of other EU countries come to work in the Netherlands. Because of this, companies have more choice and can pay lower wages.